- The Washington Times - Thursday, September 30, 2010

Many conservatives and Tea Party activists seem to think electing a sufficiently large number of principled candidates to Congress will be enough to cut spending substantially. History suggests that such cuts would be modest at best and far from what is necessary.

Real fiscal restraint requires changing the rules of the game. To reverse the continuing cascade of political favors, we need a strong spending limit to force politicians to make hard choices - think of it as “cap-and-trade” for politicians.

Spending is out of control because of the vast number of policies that provide concentrated benefits to a small number of well-organized special interests by imposing diffuse costs on a large, unorganized taxpaying public. Often unified by a common source of livelihood, these group find it worthwhile to organize, provide political contributions and hire well-connected Washington lobbyists.

Regular taxpayers, however, rarely, if ever, organize to create countervailing pressure. Today’s Tea Party movement is the exception to the rule, but if history is any guide, Tea Partiers’ activism is likely to dwindle over time. Although the total costs of regulation and redistribution add up to a significant taxpayer burden, each program may cost just a few dollars or less by itself. Going after particular special-interest preferences simply isn’t worth the small savings to the average citizen.

Because of these dynamics, taking on any major special interest - say, defense contractors, public-sector unions or health care providers - is extremely difficult for elected officials. Without going after the big beneficiaries of state redistribution, however, efforts to eliminate the deficit will stall and the fiscal crisis will not be avoided.

Elected officials need political cover to make difficult choices that upset entrenched interests. The bigger the challenge, the more politicians’ options must appear to be constrained in order to provide the necessary cover.

One promising option is to set spending limits, perhaps including limits on taxation. Spending limits can tie government outlays to some percentage of gross domestic product or, even better, limit federal budget growth to inflation plus population growth. Spending limits can smooth spending over the business cycle better than annual balanced budgets, allowing moderate deficits during recessions but surpluses otherwise, all while putting downward pressure on the fiscal burden of government over the long haul.

This approach requires politicians to spend within the means available to them. The shameful process of burdening future generations with the costs of today’s political favors would end, making the cost of government activities more transparent to citizens. Confronting the reality of public burdens and benefits, taxpayers are likely to prefer reducing the size and scope of the state.

It also would help politicians learn to say no to lobbyists. When a special tax break or direct spending favors one group over another and future taxpayers bear the consequence, it’s too easy for politicians to shrug and go along. But a limited budget means special interests have to compete with each other for a piece of government pie. If the game of political favors is zero-sum, the increased difficulty of obtaining goodies through the political process will discourage lobbyists and politicians alike from seeking to trade favors. In other words, as the benefits to the political class decrease and the costs increase, less political favoritism will take place.

Over the longer term, as the discretionary budget becomes squeezed by rising entitlement costs and the pressure of budget limits, elected officials would be forced to find offsets - special tax breaks or low-value spending - in order to focus resources on higher-priority programs. They might even consider entitlement reforms or re-evaluate America’s costly approach to foreign affairs. Members of Congress finally would have a strong incentive to root out waste, fraud and abuse and to pursue good-government reforms such as streamlining bureaucracy, returning issues such as education and criminal justice to the states and privatizing financial black holes such as federal lands, Amtrak, the Postal Service and so on.

Rather than taking on special interests one at a time, fiscal limits provide an indirect approach that requires politicians to prioritize among their pet projects. The core functions of government and those most important to the voters at large would have a major advantage over those with narrow bases of support.

Constitutional fiscal constraints are necessary to restore fiscal responsibility and reduce special-interest tax-and-spend favors. Budget limits are the first crucial step to restoring America’s confidence in a government for the people rather than one captured by special interests. Instead of pursuing piecemeal and possibly tenuous reforms, the energy of the Tea Partiers and an attentive American electorate is best spent on structural reforms that permanently establish fiscal discipline.

Kurt Couchman is a Washington economist.